THE BANGKO SENTRAL ng Pilipinas has ruled out any “extraordinary” measure to shield the local banking system from the worst financial storm to hit the United States and Europe since the Great Depression of the 1930s.

The worsening financial crisis has already prompted orchestrated interest rate cuts among major central banks across the globe, the passage of a $700-billion US bailout to take out toxic assets clogging the financial system and most recently, calls for a potential direct equity infusion by the American government in distressed banks.

Bangko Sentral Deputy Governor Nestor Espenilla Jr. reaffirmed on Friday that Philippine banks, hardened by the Asian currency crisis of 1997, were in a much better footing to hurdle the financial shakeout.

The lingering crisis, which has put the world on the cusp of a global recession, is not a cause for Philippine banking regulators to panic, Espenilla said.

“We’re somewhat in a different position than many other countries. We’re trying to manage whatever backlash there is but we’re not on ground zero,” he said.

In a bid to boost foreign exchange liquidity, Espenilla said the BSP was considering a proposal from local financial market participants to open a US dollar repurchase facility to complement an existing peso facility.

“It’s a prudent option that we’re considering but there’s no need to be stampeded (into rushing into it),” Espenilla said.

Under such a facility, if a company has a dollar asset, it can execute a short-term dollar borrowing with the BSP against that dollar asset.

But Espenilla said there was no need to provide any regulatory relief even as banks now scramble to load up on foreign exchange to comply with the required asset cover for foreign exchange-denominated assets.

Under existing rules, banks’ foreign currency deposit units (FCDUs) are required to put up 100-percent asset cover on their exposure.

“So when the value of the asset declines, they have to put in additional cover,” Espenilla said. “But there are many market-based ways to make up the cover.”

“They basically have to find ways to cover it. This is part of the business decision they took and there’s no reason (for BSP) to take extraordinary steps,” he said.

An FCDU is a unit of a local bank or of a local branch of a foreign bank authorized by the BSP to engage in foreign exchange-denominated transactions, such as accepting foreign currency deposits and granting of foreign currency loans.

As of end-June, FCDU deposits accepted by the banking system amounted to $20.5 billion. For every $1 of FCDU deposits, the banks lent out only $0.23 at end-June, but this already improved from $0.22 as of end-March.

The relatively low loan-to-deposit ratio—compared with the local banking system’s 75-percent ratio on peso-denominated accounts—showed that banks were still cautious in lending in foreign currency given the foreign exchange risks involved. During the Asian currency turmoil of 1997 that caused unprecedented peso devaluation, there were many companies which collapsed due to their foreign debt burden.

Meanwhile, the BSP’s latest report showed that the capital adequacy ratio of Philippine banks to risky assets stood at 15.49 percent on a consolidated basis as of end-March, still well above both the 10-percent prudential norm required by the local central bank and the 8-percent international standard under the Basel Accord.

The latest CAR, however, marked a decline from the 18.83-percent consolidated ratio as of end-March last year as higher risk weights were assigned to certain assets and also because of tighter capital adequacy regulations that incorporated operational risk charges.